Taming the beast of complexity

Taming the beast of complexity

2 minute read

People aren’t saving enough into their pensions. But who can blame them? The information that is put out about pensions is often complex and confusing, which makes them seem opaque and difficult to understand. So many people just give up, or make decisions which ostensibly benefit them right now.  

In an article published last week in the Financial Times, Claer Barrett told the cautionary tale of her 30 year old neighbour, who was on the verge of opting out from her highly generous defined benefit pension scheme. It is a classic story of the hero overcoming the monster, the monster in this instance being excessive complexity.  

Claer’s neighbour should have been delighted to be a future recipient of her gold-plated pension. Yet, as a result of the murky, unnavigable fog that can shroud pensions, Claer’s neighbour nearly made a decision that she would inevitably come to regret in later life.

And she’s not alone. In statistics published by the Office for National Statistics last year, only 42% of people feel that they know enough about pensions to be able to make decisions about saving for retirement: amongst the 16-24 age bracket, this statistic drops down to a staggeringly low 17%.

We must make changes to better educate the workforce about preparing for their retirement, even at the very beginning of their careers. They need to know that they could already be making vital contributions that they may come to rely on in their ever-approaching retirement.

Claer’s neighbour was lucky because she had help in her fight through the jargon and ultimately overcame her confusion. In the end she understood the value of remaining a member of her pension scheme. Unfortunately, many are not so fortunate in their battles. 

Financial education in schools would be a good starting point in helping to demystify pensions, but the buck doesn’t stop there. As Claer points out, “workplaces should be doing a lot more to educate their employees,'' and communications have the potential to act as the driving force. 

All companies and administrators issue communications about pensions to members, regardless of whether they contribute to a DB or DC scheme, and so could take that opportunity to engage staff with their savings and explain what that actually means for their future.

We should not assume that members already understand pension-related subjects being discussed, rendering any explanation unnecessary. Instead, employers should generate interesting and informative communications which aim to debunk any myths or confusion surrounding pension schemes, and engage employees into saving more as a result - a move for which the member will be infinitely grateful in the future:

“A 30-year-old on an average salary receiving the statutory minimum employer pension contribution of 3% could be almost £100,000 worse off at state pension age than an employee of the same age and salary with a 6% employer contribution”.

It is not only the content of communications, but the method that should often be reassessed. Around 65% of the population learn visually; in order to really make an impact, employers should look at communicating more with videos, graphs and images. Coupled with the fact that there has been a societal shift in preference towards receiving and digesting information digitally, the days of pieces of paper that provide members with a mass of indistinguishable statistics should be gone, and in their place relevant and inspiring digital communications should emerge.

And these communications should help the member to make decisions about their contributions, or indeed anything else related to their pension, with the relevant information readily and easily accessible. They must be captivating and comprehensible to everybody, not only a select few.

With an ageing population, retirement savings are becoming more crucial than ever before. The earlier the beast of complexity can be vanquished, and people can get on with saving for their happy endings, the better.

Taming the beast of complexity
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Rebecca Bradley - Communications Executive - Ferrier Pearce
Rebecca Bradley
Rebecca joined the Ferrier Pearce team in 2019 as a Communications Executive, having graduated with a degree in English Literature from the University of Reading.
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